Don’t tell anyone, but I’m in Davos – the Swiss mountain retreat for the global corporate elite that has fallen out of favor in an era of anti-global, anti-corporate, anti-elite public sentiment. Judging from my calendar, there’s no sign CEOs are pulling back this year. They apparently still find it an efficient place to do business — in four days’ time, they can arrange meetings that would otherwise require months of travel.
But in case any of them doubt the public mood, PR guru Richard Edelman this morning is releasing his annual “trust barometer,” based on an online survey of 30,000 people in 28 countries. The result? Trust in all institutions – government, business, media, NGOs – has fallen precipitously, and reached all-time lows in 17 countries. A majority of respondents — 53% — say the system has failed them. CEO credibility has fallen twelve percentage points, to an all-time low of 37 percent – although CEOs still beat out government leaders, in whom trust stands at 29 percent.
“The implications of the global trust crisis are deep and wide-ranging,” says Edelman. “It began with the Great Recession of 2008, but like the second and third waves of a tsunami, globalization and technological change have further weakened people’s trust in global institutions. The consequence is virulent populism and nationalism as the mass population has taken control away from the elites.”
You can read the full report here.
As I’ve said before in this space, the trust crisis is an existential one for global business. One Fortune 100 CEO told me earlier this month that if it isn’t addressed soon, “we will lose our operating license.”
We’ll be talking about this Thursday evening at Fortune’s annual CEO dinner in Davos, which will bring together 30 of the world’s top CEOs, and I’ll be reporting on this and other topics throughout the week.
More news below.
• Trump Promises Insurance for Everybody
President-elect Donald Trump promised a replacement for the Affordable Care Act that would offer “insurance for everybody.” Trump gave few details about how he would square the circle of broader coverage without raising costs, but again hinted that he would expect drug companies to take some of the strain, saying they would have to negotiate directly with the government on prices in Medicare and Medicaid. He said he didn’t intend to cut benefits for people on Medicare. Trump also said he was aiming to cut the basic rate of corporate income tax to 15%-20% to encourage “a mushrooming” of job creation in the U.S. Fortune
• …And 35% Import Tariffs for German Carmakers
The President-elect also talked to The Times of London and Germany’s Bild-Zeitung over the weekend, promising a quick trade deal for the U.K. after it leaves the EU (about which he was generally disparaging). Once again, he threatened German carmakers (specifically, BMW) with a 35% border tax on imports from Mexico. BMW said its contentious Mexico plant doesn’t need to export to the U.S. to be viable. The markets paid more attention to the negatives than the positives. They briefly pushed the pound below $1.20, judging that a U.S. trade deal wouldn’t compensate for leaving the EU’s Single Market, as seems increasingly likely. BMW, VW and Daimler share prices all fell between 1.5% and 2.1%. The Times, subscription required, Bild (German language, subscription required
• Prosecutors Want to Arrest Samsung’s Crown Prince
South Korean prosecutors have requested an arrest warrant for Samsung Electronics vice-chairman and heir apparent Lee Jae-Yong in connection with the bribery scandal that brought down President Park Geun-hye last year. A court will decide on Wednesday whether Lee will face charges of bribery, embezzlement and perjury. Prosecutors say Lee paid bribes to ensure government approval for a controversial merger between two Samsung affiliates that was disputed by activist shareholders. Although Korea has a history of pardoning the heads of its biggest conglomerates (Lee’s father was convicted and pardoned twice), whether it will continue to be so lenient in the current political climate seems less than guaranteed. Fortune
• Luxottica to Merge With Essilor in $50 Billion Merger
Luxottica, the company behind Ray-Ban and Oakley sunglasses, is to merger with France’s Essilor to create a global eyewear giant worth nearly $50 billion. The new company will control around one-sixth of the $93 billion global market for ‘vision correction’, which industry experts expect to grow strongly over the next decades. The deal will secure the legacy of 81 year-old Luxottica founder Leonardo Del Vecchio, who was forced to resume running Luxottica in 2014 after losing two CEOs in two months. Essilor was the biggest gainer in the EuroStoxx 50 early Monday, rising 13%. ”Fortune”
Around the Water Cooler
• Facebook to Ramp up Fake News Controls in Germany
Facebook will take its tools for combating fake news to Germany, hoping to stay the right side of a new law that will introduce much stiffer penalties for spreading false news. Germany is anxious to ensure that its own federal elections in September aren’t disrupted by Russian-sponsored misinformation, after widespread evidence of the phenomenon in the past year (much of it aimed at smearing migrants). The new law will introduce fines of up to 500,000 euros ($530,000) for companies and up to five years in jail for individuals. Fortune
• BP’s Victory Over Frivolous Lawsuits
U.S. litigation culture has been proverbially excessive for years, but it seems the power of the frivolous lawsuit might be less than widely thought. Some 311 people have been convicted and 102 jailed for making fraudulent claims for damages against BP in the wake of the Deepwater Horizon oil spill, according to Justice Department data, suggesting that its PR campaign when the litigation rush was at its height had at least some effect. However the numbers are still small in relation to the big picture: over 373,000 claimants have been paid, while the final bill for the disaster, before taxes, is around $62 billion. Financial Times
• SpaceX is Back
Elon Musk’s SpaceX completed its first launch since September on Sunday. It also confirmed the successful recovery of the booster rocket and the deployment of 10 satellites for communications company Iridium. That ends a painful absence from the market for SpaceX since one of its Falcon 9 rockets exploded on the launch pad. The company lost some $260 million in revenue during that time, The Wall Street Journal reported last week, but its balance sheet is still a lot stronger than that of Tesla, Musk’s automotive and solar energy venture. SpaceX says it has more than $1 billion in cash reserves and no debt. Fortune
• Make Hay (and Pump Oil) While the Sun Shines
Saudi Arabia’s oil minister Khalid al-Falih said the Desert Kingdom is unlikely to extend its deal on output cuts with OPEC and other big oil exporters beyond June, when it is scheduled to expire. Speaking at an industry event, al-Falih said that demand was picking up and hinted that some countries weren’t really complying with the deal anyway. U.S. companies have stepped up their operations to plug any gaps in domestic supply, although the number of active drilling rigs fell for the first time in two and a half months last week. Goldman Sachs expects U.S. production to rise by an average of 237,000 barrels a day this year. It’s currently just below 9 million b/d. Futures are holding comfortably above $52 a barrel. http://www.reuters.com/article/us-saudi-oil-idUSKBN1500UR
Summaries by Geoffrey Smith Geoffrey.firstname.lastname@example.org;